FASTARCHIVER SOFTWARE, LLC & Others v. ARCSERVE (USA) LLC & Another.
24-P-0383
Mass. App. Ct.May 29, 2025Background
- FastArchiver Software, LLC developed email archiving software and entered into an asset purchase agreement with Arcserve (USA), LLC for $90,000 plus potential earn-out payments based on future software sales.
- Earn-out payments were explicitly described in the contract as speculative, not guaranteed, and Arcserve had no obligation to maximize earn-out payments or even to continue selling the software.
- Arcserve paid the initial $90,000, but no earn-out was paid as, per Arcserve's earn-out reports, there were insufficient sales during the earn-out period.
- Plaintiffs (FastArchiver and its members) sued Arcserve and Marlin Management Company (Arcserve's investor) alleging breach of contract, breach of implied covenant of good faith and fair dealing, fraud, negligent misrepresentation, and certain derivative claims.
- The Massachusetts Superior Court granted summary judgment for defendants, dismissing all claims, and plaintiffs appealed. The Appeals Court affirmed the dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of Contract | Arcserve failed to pay earn-outs, report sales, and be truthful | Arcserve followed contract, no sales owed earn-outs, no specific duty to be truthful | No material fact issue: No breach established. |
| Breach of Implied Covenant | Arcserve failed to market software, depriving earn-out benefits | Contract explicitly gave Arcserve right not to market or maximize earn-outs | No claim; contract disclaimed such duties. |
| Fraud/Negligent Misrepresentation | Defendants made false claims re: financial health & active marketing | Reliance unreasonable; contract contradicted any guarantees/active marketing duties | Reliance unreasonable; summary judgment proper. |
| Derivative (G.L. c. 93A, conspiracy, etc) | Based on same facts as other claims | Fail if underlying contract/tort claims fail | Properly dismissed as derivative of failed main claims. |
Key Cases Cited
- Chokel v. Genzyme Corp., 449 Mass. 272 (scope of implied covenant tied to contract terms)
- Masingill v. EMC Corp., 449 Mass. 532 (unreasonable to rely on oral assertions contradicted by written contract)
- Care v. New England Organ Bank, 446 Mass. 270 (summary judgment standard)
- Go-Best Assets Ltd. v. Citizens Bank of Mass., 463 Mass. 50 (derivative nature of tort and statutory claims on failed contract claims)
- Kuwaiti Danish Computer Co. v. Digital Equipment Corp., 438 Mass. 459 (obvious falsity of representations bars reasonable reliance)
- McCartin v. Westlake, 36 Mass. App. Ct. 221 (cannot undo a written agreement with claims of contrary prior understandings)
- Ortiz v. Morris, 97 Mass. App. Ct. 358 (affidavits at summary judgment must be based on admissible evidence/personal knowledge)